New York State Comptroller Edward V. Regan yesterday warned that New York City could face a $3.8 billion fiscal 1992 budget gap and the risk of a state takeover if its debt service payments are "impaired" with a late and unbalanced budget.
The comptroller, in a monthly report on the city's financial plan, projects a fiscal 1992 gap that is $300 million more than the city has estimated and says he is concerned that without a budget in place, debt service payments will not be appropriated beginning July 1, the start of the 1992 fiscal year.
In addition, in his latest analysis of the city's four-year financial plan, the comptroller says the city faces burgeoning annual budget gaps through fiscal 1995.
City administration officials have two weeks to hammer out a balanced budget to be approved by the 35-member City Council. While a budget is legally due by June 24, the council has until midnight June 30 to pass it.
While an overall budget plan totaling about $28.7 billion has been presented, many of its components are not definitely in place. For example, the state comptroller said about $250 million of state aid and about $200 million in savings from the city's Board of Education "are highly uncertain."
While city officials have projected a $3.5 billion gap for fiscal 1992, the state comptroller says the gap could be $300 million wider, partially because of increased expenses.
The comptroller also warned, "If a balanced budget is not in place at the start of fiscal year 1992, the city will be in violation of state law requirements, and the Financial Control Board will be forced to re-impose a control period.
"This is because the city's ability to pay its debt service costs would be substantially impaired, since those costs increase by $800 million in fiscal 1992 and there would not be funds appropriated to pay that increase."
Even if all the measures proposed in the fiscal 1992 budget are implemented, the city faces budget gaps totaling $883 million in fiscal 1993, $1.37 billion in fiscal 1994, and $1.16 billion in fiscal 1995, the report says.
As for future bond borrowing plans, the comptroller said that despite proposing to pare about $2.9 billion from the four-year capital plan, the city will nevertheless be pressured to borrow an additional $650 million to cover capital program needs. This in turn will drive up debt service costs by $30 million in fiscal 1993, $60 million in fiscal 1994, and $85 million in fiscal 1995.
The comptroller also blasted a city proposal to capitalize interest payments on debt service with new bond sale proceeds. He also criticized a proposal to use bond proceeds to pay for maintenance costs, such as painting bridges. Painting costs are currently covered under the city's operating budget.
With the budget clock ticking down, Mayor David N. Dinkins and Peter J. Vallone, speaker of the City Council, postponed until later this week a lobbying trip to Albany slated for today because they have not finalized a joint agreement on a fiscal 1992 tax package.
The agreement is pivotal both for the sake of appearance and fiscal stability. Lawmakers in Albany, who have already signaled strong opposition to a number of taxing measures proposed by the mayor and requiring their approval, say they will not consider any tax package until the mayor and the speaker sign off on it together.
One option still under discussion and favored by Mayor Dinkins is for an agreement to raise $335 million by boosting the personal income tax rate imposed on city residents to 4.5% from 3.9%.
Originally, Mayor Dinkins called for an increase to 4.1% to raise $200 million. That would have been coupled with other tax and fee increases, including a $646 million property tax increase, and $85 million from raising the city's gasoline tax and ad valorem tax on new cars. State legislators oppose tax increases on gas and cars.
Last week, City Council members proposed increasing the city's sales tax to 8.75% from 8.25%, to raise an additional $150 million. But Mayor Dinkins, while not completely ruling it out, has said the increase would be regressive and harmful to the poor. In addition, legal concerns have been raised by the Municipal Assistance Corporation for the City of New York, which relies on city sales tax revenues to secure debt service payments on its bonds.
Meanwhile, pink slips were sent yesterday to thousands of municipal employees as part of the fiscal 1992 gap-closing plan, which calls for about $1.5 billion in service reductions.
Between 6,500 to 7,000 workers from mayoral agencies are expected to be laid off by the end of the month, even as city officials continue to press for union concessions and tax hikes to help balance the budget.
Layoffs from other agencies are also expected in the next few weeks. As of March 30, 1991, the city employed about 22,865, according to the Office of Management and Budget.
